regardless of "DX10 compatibility" the 360 can produce DX10 class graphics. Those who doubt, please play Gears of War.

That is pretty much true. My reading of the DX10 spec shows improvements for efficiency and more flexability (eg. monolithic, single pass shaders, removal of limits all over), but nothing that will actually make a final screen better than DX9. I do have a laugh when I read people talk about how a game 'looks DirectX 10' or not.

Yeah all DX10 is, is a step up. It runs things smoother, with less cost performance wise. I mean its not going to look any better when some of these games already out put a DX10 patch out. It may run better but it won't look better. However we will see newer games looking better because of how great DX10 is. So they have alot of head room.

DX10 from a technical standpoint has a large number of easy of use improvements over dx9c. DX10 has a unified shader architecture, so you don't have to mess with different sets of commands and restrictions between vertex and pixel shaders. It has lower overhead for bulk commands. It has done away with cap bits, ie: you support everything in the specification or your not dx10 compliant. As well as many other improvements. Please note I am not a games developer, I just keep aware what is going on in the industry.

As to the "I need the newest version of this api to make things look better", ultimately that line is and always has been hogwash. Like many other fields of study, once you have been given the basic building blocks anything is possible. Having better refined tools to do the job, simply makes the job easier and more efficient. Which is why there was no visible difference between shader model 2.0 and 3.0, even while the same thing is made easier to develop in the 3.0 model.